What Is A Structured Settlement?

A structured settlement is a stream of future payments that are paid by an insurance company in order to compensate you for a personal injury, wrongful death claim, medical malpractice, or other liability. These payments are generally tax exempt and they are designed to compensate you for pain and suffering, lost wages, or other similar losses.

A structured settlement is a negotiated financial or insurance
arrangement through which a claimant agrees to resolve a personal injury
tort claim by receiving part or all of a settlement in the form of
periodic payments on an agreed schedule, rather than as a lump sum. As
part of the negotiations, a structured settlement may be offered by the
defendant or requested by the plaintiff.

A settlement may allow the parties to a lawsuit to reduce legal and
other costs by avoiding trial. Structured settlements have become part
of the statutory tort law of several common law countries including
Australia, Canada, England and the United States. Structured settlements
are completely voluntary and have gained support among a wide range of
consumer and victims’ advocates.

In today’s uncertain financial climate, a structured settlement offers peace of mind. Your structured settlement provides a stream of payments specifically tailored to your personal and family needs. You don’t have to worry about the responsibilities and risks of managing a lump sum settlement to meet the needs of a lifetime. The payments come from a financially secure source. Federal law regulates how structured settlements are established.

History in few words: Structured Settlements

For a long time, when people won damages in personal injury lawsuits,
they received a large lump sum. Many recipients struggled to
successfully manage their lump sum in order to be able to continually
pay for expenses. Thus the structured settlement annuity was
established back in the mid 1980s to encourage the settlement of a
lawsuit out of court, set up a future payment stream that would fund
medical expenses, lost wages and other financial planning needs all the
while being tax exempt to the injured party.

How are payments guaranteed?

Your structured settlement payments are funded by either U.S. Treasury obligations or a life insurance company annuity, two of the safest funding sources available.

Structured Settlements: Advantages

1 - One of the biggest advantages is that both the principal and interest that accrues over time are exempt from taxes, so more money can be received over time.

2 - Payments can be scheduled to start right away, be deferred into the future and go on for any set length of time to cover anticipated future expenses or as an income supplement.

3 - Structured settlements are fixed payments paid by top rated insurance companies so they are thought to be dependable in most economic situations.

Structured Settlements: Disadvantages

1 - Lack of flexibility. Typically, once terms are set there is no flexibility and you must wait months or years to get paid.

2 - When emergencies arise or cash needs occur unexpectedly, it is not possible to access the funds in order to get money to handle those new expenses.

3 - When there are investment opportunities, you are stuck on the sidelines even though you are entitled to receive money in the future.

How significant are the financial benefits of a structured settlement?

An advantage of the structured settlement is the high level of security and financial independence it offers. A structured settlement ensures that the court settlement award will provide for you and/or your family for many years, often for a lifetime.